Walmart out of Japan
US giant, Walmart, is not satisfied with its Japanese business and is selling its wholly owned grocery chain; Seiuy. Out of Brazil, out of Great Britain and maybe out of Japan. Globalization is not easy, not even for Walmart.
Walmart plans to unload its unit Seiyu, a major Japanese supermarket chain, writes the Japanese business magazine, Nikkei. The U.S. retail giant reviews its global operations amid intensifying competition from online retailers, particularly Amazon.com.
The unit is expected to fetch 300 billion yen to 500 billion yen ($2.7 billion to $4.5 billion) and would mark the largest shake-up in Japan's distribution industry since Uny Group Holdings merged with FamilyMart in 2016.
Walmart will leave the Japanese market, following the exit of Carrefour in 2005 and Tesco in 2011.
Multiple sources familiar with the matter have told Nikkei that Walmart has approached major retailers and private equity funds about the possibility of a sale. Potential buyers include local retailers and trading houses
Amazon troubles Walmart
Walmart's recent focus has been on countering Amazon. In 2016, it purchased U.S. online retailer Jet.com for $3 billion. The acquisition was aimed at accelerating investment in digital retailing and reaping synergies with brick-and-mortar stores. It has also backed internet shopping platform in China by acquiring majority stake in a Shanghai-based online grocery retailer Yihaodian in 2012. The Arkansas-based company also invested $16 billion in India's Flipkart this year. Walmart views U.S., China and India as strategic markets and is shrinking its operations in the U.K. and Brazil.
Walmart has been strengthening its online operations in Japan as well, partnering with e-commerce company Rakuten in January. The two companies will open an online grocery service this summer.
Seiyu's supermarkets have been increasingly challenged by convenience stores and business for Seiyu, which operates large-scale supermarkets, has been tough in recent years.
Walmart’s business in Japan posted a net loss of 200 million yen for the year ending in December 2016 and broke even the following year.
Walmart entered Japan in 2002
Walmart formed a capital tie-up with Seiyu in 2002 to gain a foothold in Japan. It has gradually increased its stake in the company, turning it into a wholly owned subsidiary in 2008. Seiyu has since incorporated its parent's "everyday low price" strategy and taken steps to improve profitability. Seiyu's annual sales are estimated at around 700 billion yen ($6,3 billion)
Japan's once-dominant supermarkets, however, are facing increasingly difficult business conditions. Convenience stores, drugstores and online retailers are tough competitors.
Capital investment to improve stores has also become a burden for Seiyu as its locations are aging.
No decision made, says Walmart
“Walmart has not made a decision to sell Seiyu. We are not in any discussions with prospective buyers, and we continue to build our Japan business towards the future to meet the changing needs of customers there,” a spokesperson for Walmart told Reuters and Bloomberg.
Walmart Inc. said it’s committed to building its Japanese business, downplaying media reports that the retailing giant will sell its Seiyu chain.
The world’s largest retailer has held preliminary talks with investment banks about a possible sale of Seiyu, according to people with knowledge of the matter, who asked not to be identified because the information is private. Walmart hasn’t started a formal sale process, and there’s no certainty the deliberations will lead to a transaction, the people said.
The Financial Times reported last week in Tokyo that Walmart had approached bankers as it explores a possible sale of Seiyu, citing unidentified people.
Walmart has been reshaping its international operations. In recent months, it has sold a majority stake in its Brazilian business, agreed to cede control of its British chain Asda and spend $16 billion to acquire India’s e-commerce leader Flipkart Group in its biggest-ever deal.
Judith McKenna, who took the helm of Walmart’s $120 billion international business earlier this year, said she was “happy” with Seiyu’s performance during a press conference in late May. She added that the business was “in the middle of a transformation” with a bigger focus on grocery sales and the alliance with Rakuten.
Sources: Nikkei, Bloomberg, Reuters, Walmart.